Simone Maini (Elliptic) & Jay Wilson (AlbionVC): From Hype to Infrastructure? Crypto’s Second Act

0:00Being early does not guarantee leadership and it's really important that Europe thinks about that and thinks about how do we remain competitive. That needs an explicit commitment to responsible growth and innovation. Definitely a single market edge, but it comes with risks, either disparity in treatment or slowness to kind of stay agile. The most progressive institutions here are probably at the stage of unifying the evaluation of risk as it relates to transactions in both fiat and digital assets. Yes. There is a unified plane in which they do that. But that is on the most mature end. 90 % of organisations are not yet there.

0:41If you have digital assets as part of your treasury management policy strategy, most organisations are running these treasury strategies independently. If we think at Elliptic just about deploying our own AI-enabled crime detection, you've got three very different attitudes to our roadmap. Some who are like, go faster, go faster, go faster, we want it now. And then others who are like, oh, what does this mean?

1:07This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured.

1:12Andreas Munk Holm:Welcome everyone to the European VC podcast. Today we're exploring the outlook for digital assets at the point where crypto native innovation and traditional finance systems are increasingly forced to meet. Simone Maini is the CEO of Elliptic, a leading blockchain analytics and crypto risk management firm working with financial institutions, crypto companies, governments and regulators globally. Jay Wilson is a partner at Albion VC backing early stage technology companies that often sit just ahead of regulatory and market inflection points. Today, we're going to talk all about where real opportunity is emerging, what remains structurally hard, and how founders, investors and incumbents navigate the next phase of digital assets.

1:50Andreas Munk Holm:Simone, I want to start with you. I want to ask you, because Elliptic sits right at this intersection point of digital assets and the traditional financial system. I'd love to understand what your company actually do on the day to day and who depends on it. Yeah, fantastic. So at Elliptic, what we are doing is really providing what we call the intelligence layer for on-chain finance. So what does that mean? We think of ourselves, we operate as a data company that specializes in crypto, in digital assets, whatever term you want to put on it, to really help understand what's going on on-chain. So that means we're helping institutions answer really practical questions like, who am I dealing with?

2:38Where did these funds come from? What risk is embedded in this wallet or this transaction? And we do all of that on a real time basis because people need to know the answers to those questions right now, not next week, next month.

2:54Andreas Munk Holm:Simone, that makes perfect sense. Jay, I want to ask you the flip side of that question, which is, of course, how is Liptic a venture case? The best venture cases, the best venture thesis are really simple at heart. You have to really believe two things. First thing is that digital assets are going to play some substantial role in our world going forward. And we can debate a time frame in maybe five years, it may be 10 years. But let's say we believe that. And today, Simone will tell you much more than I will, but today that is not a contentious thesis. I think we generally believe that. And then number two, you've got to believe that this is in the category of obviously needed technologies to support that ecosystem.

3:38And again, we made the investment in 2019, and I think probably you would have debated that in 2019. you're in a phase of the market that said, most companies just want to tick the box in terms of compliance, but actually will organisations move from that to really wanting to fight crime and have institutional great infrastructure. And if you believe those two things, then you believe Elliptic has to have a venture return case. And as I said, today we have much more conviction over those two things, but five years ago, it was much less obvious.

4:15Andreas Munk Holm:I'd love to understand from your side, Simone, your geographic expansion, because you've raised many millions by now. I think your last raise was the 23 million Series A, if I'm not mistaken. I'd love to understand exactly where you're moving now, why you're establishing regional headquarters in UAE, and what that tells us all about where the digital asset activity is concentrating. Our last raise was actually a Series C and we're in the process of closing out a D round right now. Yeah, in terms of how that maps to geographic growth for us, we've always been a global company from having customers all over the world, teams all over the world.

4:59we've never really thought about ourselves as being sort of centered around one specific place because crypto by definition is borderless. And we have very much had to build a business that is kind of natively thinks about itself as borderless as well, as much as can be the case. In the early days, our kind of center of gravity was more in the US because FinCEN, the US financial regulator, was the first to lay down rules and regulations around crypto. And so that's where you would naturally see the most business over time that has shifted. We have a really strong, well-performing business in Asia Pacific, for example.

5:41We're based there out of Singapore. The Monetary Authority of Singapore has been pretty progressive on crypto. So again, both crypto businesses feel comfortable establishing themselves there, fintechs and then more recently banks are getting quite active into the digital asset space in Singapore. The UAE was our most recent kind of official launch and that was about 18 months ago now and that really reflects again what's happening from a regulatory perspective because if there isn't regulatory clarity somewhere then it's going to be quite challenging to open a open a market. So the UAE, a bit like Singapore, a bit like the EU has got really clear regulations, has been very progressive about how do we establish ourselves as a strong digital asset financial center.

6:36In fact, the UAE has the only digital asset specific regulator in the world. But it's really a kind of global dynamic now. The EU has got regulation called MECA. The US, We've seen the Genius Act pass. We're hoping to see the Clarity Act go through. And so you're seeing that kind of rising tide of regulation around the world. And it kind of goes back to elliptic being nimble and flexible about, you know, which markets we're going to operate in.

7:09Andreas Munk Holm:I imagine that there's no one better to ask almost than you about. As you're describing, we're seeing movements in all these markets. and we've also seen in the past movements in the other direction, as an example, as you described, before we got the Genius Act in the U.S. and now the Clarity Act, we had a time where crypto was deemed dead in the U.S. Can you talk a bit about how people should think about where the market is today and how volatile it is on the regulatory level? Because at least from my side looking in, and I'm in no way a crypto person, it feels like it's deemed, like it's deemed, this is going to happen.

7:54Andreas Munk Holm:It's absolutely needed. Everyone, as we saw von der Leyen, even announcing that we need this in Europe to get on the right rails and free from the visa system and so on. So I'd love to understand from you, how should we think about the geopolitical movements when it comes to crypto? Yeah, it's a really interesting question. and having been in elliptic and in this industry for a decade now myself and elliptic's been here for 13 years you know i have the benefit of sort of taking a step back and looking at how this has evolved over a long period of time and i can understand for folks that are maybe newer to it or come to it in kind of specific moments that it does feel rather volatile and uncertain and that there are different players kind of facing off in different ways, whether that's geographic players or whether it's industry players, sort of crypto versus banks, for example.

8:55We're seeing a bit of that in the US. The benefit of obviously having been in it for a decade is we have been very accustomed to all of these ups and downs. And in more recent times, certainly those ups and downs feel much less volatile than they did, you know, five, certainly 10 years ago. And so as Jay said earlier, you know, when Albion invested in 2019, you know, it certainly was the case that we had to make a really strong case for, no, like this thing is here to stay. It's real. It's going to take some time and we need you to kind of be with us and stick with us while that develops, but it's going to happen.

9:35And that was tough, right? getting investors to believe in this vision that you're painting that might not come about. But today, I do feel like that's very different. Like in the fundraising round that we're doing at the moment, it's much less about getting people to believe in this vision. People are much more aligned that that's going to happen. It's now much more about why you at Elliptic and do we believe in this specific business plan? So I do think that some of those geopolitical regulatory dynamics are abstracted away a bit more. Maybe just to put a slightly different lens or certainly like an investor language lens on that.

10:14Let's go even 10 years ago, you would have looked at this ecosystem and maybe characterized it as just unquantifiable uncertainty. There was definitely debate on will or will it not happen? we're now into a place where you're actually in sort of quantifiable risk territory. And that's not to say that everyone will come and play here because people play on the risk spectrum at different times for different reasons. But you're definitely equipped now or, you know, large customers, institutions, enterprises are definitely equipped now with the tools and the data to make really quantified decisions.

10:53Like, do I want to play here now or not? And they may choose not to. but it's a risk-based decision rather than uncertainty than I think we had five years ago.

11:02Andreas Munk Holm:I was about to ask you, Simone, if you could just double-click on Europe just because I think we're due, the audience on the EUVC podcast to do an update what's happening in crypto in Europe and is now a good time to double down? What are you seeing people do in general? Yeah, so Mika was a really important turning point for Europe, kind of widespread regulation that put Europe in a really strong position to say, yeah, we've got regulation that provides clarity, that allows businesses of all kinds to build here. But probably what you can say is that some other jurisdictions are moving even faster now.

11:49So, you know, Mika's fantastic foundation. But what about what comes next when it comes to stablecoin specific regulation or tokenization? How do we make sure that there's good harmonization that's both robust from a regulatory perspective, but also competitive amongst the European states? So we're starting to see some of that really come out now. obviously every jurisdiction can go through its own rulemaking and you do start to see those differences. Do you see some of the kind of more tech focused startups registering in certain jurisdictions and some of the more traditional financial institutions in other jurisdictions?

12:32What does that mean? I guess the lesson from that is that being early does not guarantee leadership And it's really important that Europe thinks about that and thinks about how do we remain competitive. That needs an explicit commitment to responsible growth and innovation. the other thing is again because of that rulemaking in different jurisdictions within the EU how do you make sure that the regulations are predictable in practice because there's one thing writing them down on paper and then there's the other thing is enacting them enforcing them with businesses businesses need to feel like they can predict how they're going to get treated Otherwise, that is counter to encouraging businesses to make growth bets.

13:24So I think there's definitely a single market edge, but it comes with risks, either disparity in treatment or slowness to stay agile. I double click on that last point in particular, because that's where I see the biggest frustration from, you know, insurgent companies where there is a disconnect between headline policy and on the ground implementation. these frameworks are transformational if you read the headlines but actually what companies on the ground need to understand and need to know is you know what is the timeline what are the practical steps that we can make how do we engage with the regulators in this jurisdiction on on practical applications of these these topics and invariably there is a there is a disconnect between those two things and in many cases it's not really the regulators fault actually but because it's the on the ground applications where the real innovation happens, it is really true.

14:24Like the devil is in the detail here. And much of that invariably hasn't been figured out yet. So it's not criticism, but it's very much, I can see that dynamic playing out across the majority of companies I'm on the board of where they're, they're operating at the fringe of the sort of regulatory frontier.

14:41Andreas Munk Holm:Simon, this whole segment around how the geopolitical markets are moving or how the markets are moving in reaction to the geopolitical climate is, of course, a perfect tie-in to then asking you, because you've raised 79 million to date, you're about to do your Series D. I'd love to understand what principles are guiding you when you're deciding where to deploy your capital. Yes, it's a really interesting one. And ultimately, that's the job of the CEO, right? Like thinking about resource allocation is the number one thing. I mean, if we just go back to kind of pre-fundraising, we certainly did have some debates about whether we want to raise at all, right?

15:22And really thinking about what's the right thing for the business. We were pretty much on a sustainable footing. The company could, you know, it was close to cash flow break even. There's that debate about continuing to be fully in control of your own destiny versus being funded to accelerate growth. And it's a real trade-off between the two. Ultimately, we felt very strongly that the market opportunity is just taking off with such momentum, both because of this intersection of regulatory clarity, but then also these really practical use cases that go beyond crypto into stable coins and tokenization.

16:11that just means the unlock of the opportunity that we have believed in for over 10 years is right here. And we want to be in a position where we can capitalize on that. Also acknowledging the fact that the product set that Elliptic has built, the moment for that product set is right now. We basically said 10 years ago, money movement is going to migrate on-chain. Financial institutions, technology companies payments it's all going to move from off-chain to on-chain and we want to be the ones that are providing the data infrastructure to enable businesses to confidently understand who's behind those money movements if you take the fact that yet we've built that enterprise product set and the market is there it was like hang on like we have to make sure that we're funded to be able to go after this opportunity is ultimately how how we thought about it.

17:05Yes, some of it from a resource allocation perspective is about market coverage. Are we in all the right places that we want to be? Again, but going back to stable coins, perhaps, you know, really we're seeing the payments industry and a lot of payments rails migrating towards stable coin adoption. And that is bringing lots of jurisdictions into scope that otherwise, when it was really more about kind of crypto trading were less in scope. So for us, that definitely means that we're not in some places today, like geographically, that we would like to be in, where we see opportunity. And then the second aspect is, of course, on the product roadmap.

17:49The world is changing faster than I think any of us have ever experienced. And when you combine something like stable coins and payments with agentic commerce. A, the opportunity for us is massive, but B, our product roadmap has got to innovate and adapt at lightning speed. I mean, from a very high level, those are the kind of two big categories where we're going to be putting resources.

18:18Andreas Munk Holm:Where do you see the, and this is maybe a bit weird question, but where do you see the biggest growth coming from? Is it this fact that we have the banks and the payment system coming on? Or is it the agentic trading and the need for agentic trading to work that kind of needs to get rid of all the transaction costs? Look, I think it's for sure an and between those two things. It can't be an or. There will definitely be, though, some sequencing. So I think we are, from a kind of go-to-market, near-term perspective, really focused on the diversification of the types of financial institutions in the market.

18:59And that has been playing out for a while and continues to develop. So I think that's really where the near-term opportunity is. And then I think as we look out a little bit further, kind of more into Horizon 2, that's really where the, you know, agentec commerce, agentec payments opportunity comes into view.

19:23Andreas Munk Holm:I'd love to ask the two of you a question about your dynamic as investor and founder, but also friend and trusted advisor. Because I imagine, Jay, that Simone, when you backed her back in the days, she's gone on to do incredible things that were exactly what you hoped for. But now she's in a position where she has access to rooms that are very important for you to understand how they're thinking. And on the other hand, I also imagine that for you, Simone, someone like Jay, who's investing in the earliest stages with the majority of his capital, it's also quite important and interesting to hear from what are you seeing when it comes to the authentic commerce, as an example.

20:03Because I imagine that you see a lot in that, Jay, that for you, Simone, on a revenue perspective or client perspective, has yet to really hit you. There's a couple of roles here that is important that I think some people don't get to the type of relationship very late. And I think the important thing to say about this is it's very important to understand what your role is as a VC and investor as a board member. And to be fair, it can be many things, but actually creating a social contract at the beginning of that relationship is really important. And that social contract speaks to how you want each other to show up in this dynamic.

20:47What is it you want from them and what is it that they want from you? You know, investors, board members, they come in different sort of sizes and shapes with different experiences and can bring a lot of value. But the day job, the core role predominantly is to help founders understand the impact of their decisions on the capital markets. That is our day job to help them understand that. And if you can do that, and that's how you show up nine out of 10 days, I think that's a good baseline. What it shouldn't be, and I think where there's a disconnect, is where we show up as investor board members to try and, in the worst case, tell.

21:27It should never be a tell. But in many cases, show founders what customer markets or product markets they should be operating in. So I think that's probably something just to defend against. I think more than that, you're trying to be the sort of emotional counterbalance all the time. You know, elliptics, not dissimilar to many others and arguably at the end of the spectrum, which is, you know, the digital asset industry is extremely volatile. So it is truly an emotional rollercoaster. And you're trying to be the counterbalance to that all the time. And I think if you can do those things, you set yourself up for a very long term relationship with the founder.

22:05And the reality is, as Simone said, you've been doing this 10 years. You know, if it goes well and, you know, we all hope it does go well, if it goes well, it is a 10 year journey here. Right. So this is not something you're embarking on for a couple of years. And actually, you know, it's incumbent on everyone to really think about, like, how do you set that up? That's not something that you just fall into or fall into falls into place. You've got to kind of work at that, like any relationship in many cases.

22:34Andreas Munk Holm:Simone, let me hear. You have now known Jay for quite a while, since 2019. And I'd love to understand where you've probably known him from before then, actually. I'd love to understand how your relationship has grown, when you've leaned on him, how you're leaning on him now, even as an early stage investor that's still with you at the near series D. Yeah, sure. Well, so Jay said something about, you know, the emotional side of it, right, or the relationship side of it. I think that just shouldn't be underestimated by founders and management teams, you know, both in terms of what you should expect from your investor, but also what you can ask for in terms of support.

23:21right like obviously you begin the relationship mostly from a financial perspective but it is so much more than that or it has the power to be so much more than that you know jay mentioned and i agree with him that you know the roller coaster of crypto like it is on the extreme um all all founders and all businesses go through extreme uncertainty we've definitely been through that on multiple cycles in crypto, some which have been, you know, really tough in recent years, right? You know, Albion invested in 2019. You know, very shortly after that, we went into COVID, then we went into a really aggressive bull market, everyone was, you know, grow, grow, grow, spend, spend, spend.

24:08And then it was like, everything fell down, down off a cliff, FTX, everything. It was, it was, it was really rough. And I think the emotional support that you can get from the people in your boardroom has an outsized impact on how you make decisions, how you show up inside your company and the level of confidence you've got that ultimately it is going to be okay. Like it's going to be really painful for a while, but it is actually going to be okay. And we've like, we've got your back. Like that's a really powerful thing for a CEO to feel when everything else feels like literally the world is just burning around them.

24:51You know, Jay and the team have always been incredibly thoughtful about how they show up in that moment. The other thing is, it's not just all about the business, right? Like myself, the founders of Elliptic, like we've all had like small kids during this process or like other big life changes like you know we're we're all full humans with full lives and I think um having that kind of acknowledgement and and connection with each other just means that when you need to have that really hard conversation you're much more likely to have that when you know the person on the other side of the table sees you and and and the full context of of that you're building the business in.

25:38Andreas Munk Holm:Jay, given you just got unsolicited praise for your ability to show up, I want to ask you a question because we all know the founder stories of everything being great with their investors when things are going the right way. I spoke to a climate investor the other day, or sorry, a climate founder the other day, who described exactly that scenario, that everything was up and to the right. And then climate kind of fell off a cliff after Trump came back in January last year. And since then, the boardroom turned quite sour. And he had not seen that coming. He had not seen it in the investors beforehand.